Bank losses could reach €830bn over three years, with half of the European lending system barely surviving
They are already acting preemptively to shore up their capital buffers, tightening credit lines to vulnerable firms, threatening to set off a vicious circle.
There is no immediate pressure on EU debt markets. ECB bond purchases hide all sins. Risk spreads are beautifully behaved.
But this is not a stable equilibrium. Sovereign debt ratios will reach extreme levels across much of the Club Med bloc this year, hitting 160pc of GDP in Italy.
Whatever they claim, EU leaders never completed the eurozone banking union.
The sovereign-bank "doom loop" of 2012 is still there. All that has changed is the scale of the menace.
Ambrose Evans-Pritchard Telegraph 22 September 2020
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